1, The Commonwealth of Virginia mandates that all drivers not only have automobile insurance but also carry additional insurance for uninsured drivers. The Commonwealth argues that some drivers will still not purchase insurance, and these uninsured motorists cost other drivers money through higher premiums. Which of the following can be used to support the Commonwealth's argument?

Adverse selection

None of the other responses are correct

Negative externalities

Allocative efficiency

Moral hazard

2, You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 4, and MPK = 40 the firm:

should use more K and less L to cost minimize.

is profit maximizing but not cost minimizing

should use more L and less K to cost minimize

is cost minimizing

3,It is profitable to hire units of labor as long as the value of marginal product

exceeds average product

equals price

is less than wage

exceeds wage

4, Tim recently received a promotion and is now managing his former co-workers. Previously, Tim and his co-workers would go out together and they still remain friends on social media. Tim has found that trusting his former co-workers to "get the job done" is not working. It seems that while some are working as hard as usual, others are now taking more time on breaks, playing with their phones at their desks, or not showing up for work at all. Tim's management style of "we are all friends, let's work together" is failing because:

None of the other responses are correct

Incomplete information

Asymmetric information

Adverse selection

Diminishing marginal utility

Moral hazard

5, cinemas sometimes give senior citizens discounts. What is the possible motivated purpose for them to do so?

Senior citizens lack recreational activities

None of the other statements are correct.

Purely because entrepreneurs are benevolent

Senior citizens have a more elastic demand for movies than ordinary citizens.

6, sue has just finished high school and is about to enter college. When asked if she is going to purchase health insurance, she replies that she does not need it because she is in good health and has no family history of illness. Sam, on the other hand, when asked the same question, says she is going to buy health insurance because she just found out that some of her extended family have been diagnosed with a debilitating genetic condition. In economics, this is considered an example of

Moral hazard

Incomplete information costs

Smart decision making

Adverse selection

Game theory

7,

Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the midsized town of Godrick Hollow. Each firm must decide on whether to increase its advertising spending to compete for customers. Godrickporter's (G) Choices Increase advertising budget Leave advertising budget as is Star Connections' (S) Choices Increase advertising budget G: $16,000 profit S: $8,000 profit G: $12,000 profit S: $15,000 profit Leave advertising budget as is G: $8,000 profit S: $10,000 profit G: $6,000 profit S: $12,000 profit

Star Connections increases its advertising budget, but Godrickporter does not.

There is no Nash equilibrium

Godrickporter increases its advertising budget, but Star Connections does not.

Both Godrickporter and Star Connections increase their advertising budgets. MacBook

8,

Despite a 21 percent drop in the average selling price of its line of phones, a major smartphone manufacturer's product shipment increased by 108 percent. Given this information, we would expect the company's revenue to: Rise

Unchanged

None of the other responses

May rise or drop

Drop

9,

One of the conditions under which price discrimination is profitable is

None of the statements are correct

Differences in demand elasticities

All of the statements are correct

Inability to resell the product

Ability to identify consumer types

10,

If 1% change in price causes more than 1% change quantity demanded for a product, the own price elasticity of demand is:

Unitary elastic

Relatively elastic

Relatively inelastic

Perfectly elastic

Perfectly inelastic